As customer engagement evolves, Social CRM poised for major growth

With the Social CRM industry expected to top $1 billion in revenue in 2012, it's growing faster that just about any other segment of social business. Yet the classic challenges of dealing with newly empowered customers but slow-evolving enterprise processes are likely to mean plenty of lost opportunity. To catch up, how can companies better re-conceive the way that they will engage with the customers?

The Social CRM lifecycle can be situated with one's customers as a continuous "virtuous cycle" of engagement, mutual support, value exchange, and viral advocacy. Of all the many flavors of social business these days, one of the fastest growing this year is the application of social media to customer relationship management. Usually known as Social CRM, the name itself obscures the deep transformation that occurs with companies that employ the strategy with their customers. A buzzphase for several years now and one that I've exploredhere in the past, Gartner reported last week that the new industry is now set to nearly double to over $1 billion in revenue next year.

A few key precepts set the practice apart from the far more records-based, traditional CRM. First and foremost, Social CRM is about customer engagement with high-value relationships, typically using social media approaches for improving the sales, marketing, and customer care processes. Just one example: The most successful examples of Social CRM often puts the customer in the center of the support processes, even for other customers. For those that want to dive into the current product offerings in the space, I urge you to look at fellow ZDNet blogger Paul Greenberg's CRM Idol coverage, where he's looking in-depth at a host of new products. He also recently set about defining Social CRM in considerable detail and it's one of the best places to get an overview of the state-of-the-art.

Catching up on Paul's exploration of the most recent Social CRM products, it's become clear how much the space has evolved into both core specialties and end-to-end capabilities, which will ultimately make the field mature enough and complete enough for most companies to use it for the entire customer lifecycle. But those days are largely ahead of us. Instead, most companies use CRM at the moment for the mundane task of keeping track of their customers in a database and logging the communication they have with them.

The issue of course is that there is a large divide between the CRM processes companies have today and how they have to organize around Social CRM in order to reap the benefits. These benefits generally break down to less expensive, richer, and more effective CRM processes that are "co-created" with their customers. Jeff Nolan, an executive at Social CRM leader GetSatisfaction and a fellow Enterprise Irregular, recently explored the challenge of when consumers exert ownership, finding himself troubled about the painful truths that companies are encouraged to discuss during social media-based engagement with their customers:

Authenticity is critical but so is being good at what you do. [With Social CRM] your customers are your marketing team and they don’t care about how efficient your business operations are from a P&L standpoint, they are demanding that you deliver a good product with good service wrapped around it. If your idea of being authentic is to shrug your shoulders, kick the dirt and say “yeah we could do better” without actually making the sincere attempt to change the things that are wrong, then go home now and save us all the trouble.

We have entered the age of empowered individuals, who use potent new technologies and harness social media to organize themselves. A few have joined cause with WikiLeaks and its terrifying stepchild dren, upending the once secure corridors of the U.S. State Department and Pentagon. But most are ordinary people with new tools to force you to listen to what they care about and to demand respect. Both your customers and your employees have started marching in this burgeoning social media multitude, and you'd better get out of their way--or learn to embrace them.

The institutions of modern developed societies, whether governments or companies, are not prepared for this new social power. People are changing faster than companies.

Of course, this is nothing new to those following the social business discussions of the last couple of years. Customers are now far more in charge of the business relationship given that they have as big or bigger a voice in the world now than most companies do.

Yet the premise here is the Social CRM gives us a way to directly and profoundly harness that power and put it to mutual good use. As the broad outlines for what are possible emerge we can see how it will look as a complete CRM process in its own right. The visual above depicts a larger sense of how the Social CRM lifecycle can be constructed and situated with one's customers as a continuous "virtuous cycle" of engagement, mutual support, value exchange, and viral advocacy. The concept is based on some ideas that Jeff also explored in the Enterprise Irregulars mailing list and on which I collaborated, believing that he's on the right track.

What does this mean? Companies looking at modernizing their marketing, sales, and customer service will increasingly find that it's an imperative to bring together new social business processes to greatly improve and accelerate customer acquisition, transactions, support, and customer advocacy. Constellation's Ray Wang recently surveyed over a 100 early adopters of social business and of the 43 use cases he found, service and support was at the top, putting the support aspect of Social CRM in top contention as the social business driver at the moment.

How will organizations transition to Social CRM? Right now, they must assemble a series of secure digital services, online communities, back-end capabilities, and integrate them with existing LOB systems to achieve the full lifecycle shown above. Soon however, real end-to-end Social CRM will be largely available out of the box, to plug into the enterprise whenever they become ready. For as David Kirkpatrick noted above, the good news is that customers are increasingly expecting this relationship experience and they are ready now. The question is how long it will take and how much opportunity will be lost as slower moving enterprises begin adapting to the new reality.

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